Sensex tumbles 383 pts, Rs. dips 46 paise on Rajan’s punch

After a Terrific Thursday, it was Funk-out Friday. Reserve Bank of India (RBI) governor Raghuram Rajan surprised markets with a bold decision to hike interest rates on fears of rising inflation, triggering sharp falls in the Sensex and the rupee. Speculation-driven markets were unimpressed by Rajan’s long-term stance.

Banking stocks were severely hit, dragging the benchmark down.The BSE Sensex, which fell 595 points to 20,051 immediately after the announcement, recovered some ground later to end the day with a fall of 383 points, or 1.9% — the most in three weeks — to 20,267. On Thursday, it had moved up 3.4%.

The broader NSE Nifty dipped 104 points, or 1.7%, to 6,012.

The rupee also extended losses, falling as much as 62.61 to a dollar, before suspected RBI intervention helped ease some of the losses. It closed at 62.23 against the US dollar versus 61.77 on Thursday.

The Indian currency, which fell around 20% to record lows in late August, recovered around 9% since Rajan took office on September 4.